MRO universe moves to Asia
The Boeing 2018 market outlook forecasts that in the next 20 years 16,930 new aircraft will be delivered in the Asia-Pacific region and the area will have the world’s largest number of aircraft, making up 37 percent of the global fleet with narrowbodies growing from 5,270 to 12,880. Michael Doran looks at the maintenance, repair and overhaul (MRO) implications of such growth.
Boeing predicts that global spend on maintenance, engineering, parts and upgrades will grow from US$75.6 billion to US$164.7 billion with Asia-Pacific spending $US60.3 billion, up from US$22.2 billion in 2017. By 2037 the region will be spending double what is spent in North America or Europe to become the dominant market for MRO services.
New-technology aircraft will extend service intervals and the engine of the future may diagnose problems itself, but ultimately all of these aircraft will need to enter an MRO facility at some point. The question is, can Asia-Pacific capitalise on the MRO opportunities associated with operating the world’s largest fleet and is enough being done now to get the foundations in place?
Four companies that already have substantial MRO operations in the region are Pratt & Whitney, Airbus, Lufthansa Technik and MTU Maintenance. AAV contacted this mix of OEMs and independent MROs to see how they are coping with this growing demand.
With an increasing reliance on “pay-by-the-hour” service agreements and multiple engine types in service, Pratt & Whitney has a keen interest in its MRO presence in Asia-Pacific. Overseeing the MRO operations is Singapore based Brendon McWilliam, senior director, Aftermarket Operations – Asia Pacific, who told AAV: “2018 has been a good year for us and we are seeing growth across our engine shops in Christchurch, Singapore and Shanghai.”
P&W provides support to operators of the V2500, PW4000 and GP7200 engines as well as the CFM56 series. It is also setting up the capability in Singapore to take on MRO for the latest generation Geared Turbofan (GTF) engine, the PW1100G-JM, commencing early 2019. The V2500 engine is used on the Airbus A320 family with around 6,000 in service. “We expect to see demand stay steady at around 1,000 shop visits a year for the next seven to eight years. A lot of engines out there still have not been in for their first shop visit so we will have a good strong supply base for years to come,” McWilliam said. In anticipation of that demand P&W has increased capacity for the V2500 in Christchurch and added this type to the capabilities in Shanghai.
The Singapore operation is the P&W global centre of excellence for the PW4000, making it an overhaul and off-wing heavy maintenance destination for operators around the globe. The engine, the powerplant for A330 and B777 aircraft, is considered to be maturing and although global MRO demand is declining, the Singapore operation has increased business by 5 percent. With the PW4000 expected to remain in service for another 20 years, the development of a centre of excellence has put P&W Singapore in an excellent position to grow this business.
With orders and options for more than 9,000 engines, MRO for the GTF looms large in any planning at P&W. “Given the number of engines that will be under a fleet management contract, it’s going to be very much standardised in terms of work-scope delivery, what we need to do in the shop and how we process these engines. This standardisation really allows us to accelerate the engines though the shop and use the technology and tools to get them flowing through the process quickly,” McWilliam said.
Already there is a network of five GTF capable operations – P&W USA, MTU Germany, IHI Japan and two LHT sites in Germany. By 2020 it will have added P&W in Singapore and Delta TechOps in the US to the network spanning three continents. “Although the growth is in Asia we are still very much a global company so we are geographically well placed to serve our customers whichever continent they come from” said McWilliam.
P&W recognises the need to develop tomorrow’s workforce today and anticipates a need to hire around 25,000 employees globally in the next 10 years. Currently they have more than 3,000 in the Asia-Pacific region and they expect to add another 500 in Singapore in the next five years.
“Front to back, across all levels and functions we have to make sure we don’t get caught out where people are concerned. We are really grooming our employees and giving them the tools as with technology today it is about how fast you can move and adapt – it’s exciting times for our people,” McWilliam said.
One company that has built a solid foundation is MTU Maintenance, the aftermarket services division of MTU Aero Engines. The engine MRO business unit has more than 4,000 employees located at 11 sites across the globe with its Asian operations centred in Zhuhai, China.
AAV asked Jaap Beijer, general manager of the Zhuhai operation, if his business was benefiting from the growth in Asia. He said: “In short, yes, as a result of recognising the region’s potential early on. We set up MTU Maintenance Zhuhai as a joint venture with China Southern nearly 17 years ago. The facility is ideally located in Zhuhai’s free trade zone and we benefit from its proximity to Hong Kong, Guangzhou, Shenzhen and Macao. The Asian region is now the number one in the world for engine MRO volume in term of revenues and produces around a quarter of all shop visits. As such, yes, the region has seen massive growth in the past years, and predictions remain bullish.”
By 2027 more than 40 percent of the region’s engine MRO, both by number of shop visits and revenues, will be generated from the Chinese market. “As most visits will be performed on narrowbody engines, MTU Maintenance Zhuhai, the largest narrowbody shop in Asia, is ideally placed to serve this growth. We are preparing our shop for the future engine business to always be able to serve the needs of our valued customers,” Beijer said.
MTU is in the process of planning further expansion which will increase capacity by 50 percent to 450 engines per year in 2021. Currently modifications to the site are being undertaken which will add capacity for an extra 50 engines per year in the interim. Beijer explained: “Additionally, we are introducing more and more repair capabilities to keep work in house and reduce cost and turnaround time.”
On the issue of keeping Asian MRO work in the region, MTU is already in a strong position due to the Zhuhai business being in partnership with China Southern. “Aside from the base-load we receive from our joint venture partner, China Southern, around an additional third of all shop visits come from other Chinese and Asia-Pacific operators. We have an extremely diverse customer base: The facility serves over 70 customers, including International Aero Engines, Saudia Airlines and All Nippon Airways, as well as Chinese Shenzhen Airlines and Hainan Airlines for example,” Beijer said.
He concluded by saying: “We have always had a strong presence in the Chinese market and are in fact the number one MRO in the country. Further, we are number two in the Asian region by shop visits. After nearly 17 years of maintenance work at MTU Maintenance Zhuhai, many Chinese customers trust our experience and quality. That is why the company has been and is asked to also perform on-site tasks to keep fleets flying in critical situations such as AOG.”
With the vision of creating a seamless support system for the region Airbus established its Customer Services Hub, located in Singapore’s Seletar Aerospace Park. From here Bruno Bousquet , the company’s vice president for Customer Services, manages a team of more than 1,000 specialists spread across the Asia-Pacific region.
In order to support the growing fleet in Asia, Airbus has taken a number of new initiatives. Looking at how 2018 has been progressing, Airbus said that momentum in the services business is growing in the region and the most significant development has been the progression of the joint venture agreement with Thai Airways for a new MRO facility at U-Tapao Airport near Bangkok.
“The new MRO will be one of the most modern and extensive in the Asia-Pacific region, offering heavy maintenance and line services for all widebody aircraft types,” Airbus said. “The facility will feature the latest digital technologies to analyse aircraft maintenance data, as well as advanced inspection techniques, including the use of drones to monitor aircraft airframes. The U-Tapao complex will also have specialised repair shops, including for composite structures, as well as a maintenance training centre offering extensive courses for technical personnel from Thailand and overseas.”
Recognising the need for a proactive approach to MRO, in 2017 Airbus formed their MRO Alliance with two out of the original six partners located in Asia, China Airlines in Taiwan and GAMECO in Guangzhou.
In Malaysia, Airbus subsidiary Sepang Aircraft Engineering has added a second hangar to meet increased MRO demand and to give it eco-friendly painting capability. HMS Services, a joint-venture with SIAEC, has heavy airframe maintenance capability at Changi Airport and is working towards becoming an Airbus Centre of excellence for the A380 and A350 in the region.
Airbus also believes that its Flight Hour Services agreements will make MRO a much more tailored process leading to efficiencies and productivity gains for both MRO and Aircraft operators. They said a key element is the huge amounts of data generated by the aircraft, enabling MROs to predict the required maintenance and minimise aircraft on-ground time. Current Asian customers for Skywise include AirAsia, Asiana Airlines, Bangkok Airways and Peach Aviation.
Airbus said that while their presence in Asia dates back decades, in terms of support and services there has been a clear acceleration. “We have already mentioned our joint ventures and partnerships in the region. We are here to stay in the region as we see ourselves as long-term partners and customer intimacy brings efficiency for our customers. Our work here is about the growth in the region and being close to our customers. This is not so much about bringing work from one place to another, as it is meeting the growing demand in the region”.
Component Services is another large sector in the MRO environment and global giant, Lufthansa Technik, has well established operations throughout Asia. The hub for the region is LHT Shenzhen and it was from there that vice president for Component Services, Burkhard Pfefferie-Tolkiehn, told AAV about its business focus.
“Our business in the APAC region continues to grow as we have been witnessing increasing demands in the regional component market. To ensure a smooth and efficient operation and enhance the quality for our customers, our regional teams have been strengthened, particularly in the area of customer service and material management. By now we are taking care of our customers from more than 10 locations throughout Asia” he said.
“As part of our regional growth strategy, we have been investing further into our in-house repair capability at Lufthansa Technik Shenzhen, as well as expanding our component stock availability in our warehouses in Hong Kong and Singapore. These developments enable us to address and support the vast majority of our customers’ component requests in Asia.” A further sign of its commitment is the shift to new facilities at the Bangalore, India operation, where the workforce has doubled in size and grown to 120 employees.
The group has been able to grow its business and increase market share across the region with a focus on securing long-term contracts with customers. “We see more and more airlines considering outsourcing of MRO as a way to reduce complexity and costs of their operation. At Lufthansa Technik we are confident that via our products and services, we can add considerable value to operators in APAC. The market is certainly fiercely competitive and we see players from all segments competing for market share.”
However he also sees some challenges to further growth. “We hope that several markets in APAC will open up for further investments here in the region. Removing bureaucratic hurdles and creating an investment-friendly climate would certainly foster growth.”